CEOs of small businesses spending a fifth of their working week on HR

Research from breatheHR, a HR software platform, uncovered that CEOs of small and medium-sized businesses (SMBs) are losing a fifth of their working week to HR activity, which includes a long list of admin tasks from signing off expenses to logging sickness absences. As a result, CEOs find themselves caught in a HR limbo with executives unable to focus on strategic imperatives and the growth of their company.

CEOs are overwhelmed by the minutia of HR. And it’s costing their businesses. The time they’re allocating to it is the equivalent to £18,700 or 21 per cent of the median average salary of a CEO. With the OECD ranking the UK 13th in the world when it comes to start-ups going on to become successful SMEs, it’s clear non-strategic HR tasks have the potential to negatively impact a CEOs ability to successfully navigate the different stages of company growth.

CEOs are spending more time on HR than office or operations managers (seven hours) and finance managers (three hours). In comparison to CEOs, the monetary value to a company of an office manager undertaking these tasks is £4,534.

Jonathan Richards, CEO, breatheHR said: “CEOs have an exceptionally important role to play in the design of company culture but they have little value to add when it comes to HR admin.

“The commercial value of a CEO approving holiday requests is non-existent. However, it appears there is little distinction between the strategic and transactional elements of HR within small companies.

“The danger is that as holiday requests pile up in a CEOs inbox, HR increasingly becomes seen as a box-ticking exercise, therefore undermining the positive impact a strong HR strategy, closely aligned to business ambitions, can have.

“Just look at Netflix. It’s pioneered several new approaches that have broken the mould, all tied to its ‘freedom and responsibility’ ethos that trusts people to make reasonable judgements about their working lives. The result? Netflix has disrupted an entire industry from the ground up and is seen as a beacon of innovation. There’s a lesson there for CEOs of SMBs everywhere.”

The research found that, even for SMBs that have a dedicated HR manager or work with an external consultant, the admin soon adds up. HR consultants spend on average, 22 hours each week managing the minutiae of HR, while HR managers spend 20 hours each. That’s approximately three days a week that is not being spent on achieving more strategic business goals. Put in financial terms, that’s worth £24,536 of the HR manager’s time, and £21,449 of the HR consultant’s.

Alongside investigating the cost of HR to the business, the study also analysed how much time SMBs could save by implementing dedicated HR software to manage process-orientated tasks. It found that on average, investing in HR software can save UK small businesses five weeks a year. For companies with between 100-249 employees this increases to ten weeks every year. CEOs themselves can claw back three hours of their working week, equating to £7,012 over the course of a year. HR managers are also one of the key beneficiaries, saving five hours a week, which as a saving to the business is £6,134 or 13 per cent of their annual salary.

Robert May, CEO, Ramsac said: “No one gives you a magic book that tells you how to run a company so when we first started I thought I was adding value by doing a lot of the HR admin tasks and that people would value it. I’d be the ‘cool’ CEO.

“Fact is that I was a real bottle neck and my involvement created a lot of frustration. Without any systems to support things like holiday and sickness I found myself in a leadership trap, I wanted to get away but I couldn’t.

“A bit like the Godfather just when I thought I was out they pull me back in’. I was constantly being dragged back to administrative tasks when I needed to be leading the business.”